It’s all about the power — and the cronyism.
Almost exactly one year has passed since Donald Trump declared, “I am a Tariff Man.” Uncharacteristically, he was telling the truth.
At this point I’ve lost count of how many times markets have rallied in the belief that Trump was winding down his trade war, only to face announcements that a much-anticipated deal wasn’t happening or that tariffs were being slapped on a new set of products or countries. Over the past week it happened again: Markets bet on an outbreak of trade peace between the U.S. and China, only to get body slammed by Trump’s declaration that there might be no deal before the election and by his new tariffs on Brazil and Argentina.
So Trump really is a Tariff Man. But why? After all, the results of his trade war have been consistently bad, both economically and politically.
I’ll offer an answer shortly. First, however, let’s talk about what the Trump trade war has actually accomplished.
A peculiar aspect of the Trump economy is that while overall growth has been solid, the areas of weakness have come precisely in those things Trump tried to stimulate.
Remember, Trump’s only major legislative accomplishment was a huge tax cut for corporations that was supposed to lead to a surge in investment. Instead, corporations pocketed the money, and business investment has been falling.
The truth is that even economists who opposed Trump’s tax cuts and tariffs are surprised by how badly they’re working out. The most commonly given explanation for these bad results is that Trumpian tariff policy is creating a lot of uncertainty, which is giving businesses a strong incentive to postpone any plans they might have for building new factories and adding jobs.
It’s important to realize that Trumpian protectionism wasn’t a response to a groundswell of public opinion. As best as I can tell from the endless series of interviews with white guys in diners — who are, we all know, the only Americans who matter — these voters are driven more by animosity toward immigrants and the sense that snooty liberals look down on them than by trade policy.
And public opinion seems to have become far less protectionist even as Trump has raised tariffs, with the percentage of Americans saying that free trade agreements are a good thing as high as it’s ever been.
So Trump’s trade war is losing, not gaining, support. And one recent analysis finds that it was a factor hurting Republicans in the 2018 midterm elections, accounting for a significant number of lost congressional seats.
Nevertheless, Trump persists. Why?
One answer is that Trump has long had a fixation on the idea that tariffs are the answer to America’s problems, and he’s not the kind of man who reconsiders his prejudices in the light of evidence. But there’s also something else: U.S. trade law offers Trump more freedom of action — more ability to do whatever he wants — than any other policy area.
The basic story is that long ago — in fact, in the aftermath of the disastrous Smoot-Hawley tariff of 1930 — Congress deliberately limited its own role in trade policy. Instead, it gave the president the power to negotiate trade deals with other countries, which would then face up-or-down votes without amendments.
It was always clear, however, that this system needed some flexibility to respond to events. So the executive branch was given the power to impose temporary tariffs under certain conditions: import surges, threats to national security, unfair practices by foreign governments. The idea was that nonpartisan experts would determine whether and when these conditions existed, and the president would then decide whether to act.
This system worked well for many years. It turned out, however, to be extremely vulnerable to someone like Trump, for whom everything is partisan and expertise is a four-letter word. Trump’s tariff justifications have often been self-evidently absurd — seriously, who imagines that imports of Canadian steel threaten U.S. national security? But there’s no obvious way to stop him from imposing tariffs whenever he feels like it.
And there’s also no obvious way to stop his officials from granting individual businesses tariff exemptions, supposedly based on economic criteria but in fact as a reward for political support. Tariff policy isn’t the only arena in which Trump can practice crony capitalism — federal contracting is looking increasingly scandalous — but tariffs are especially ripe for exploitation.
So that’s why Trump is a Tariff Man: Tariffs let him exercise unconstrained power, rewarding his friends and punishing his enemies. Anyone imagining that he’s going to change his ways and start behaving responsibly is living in a fantasy world.
Many of the tales of controversy to emerge from the Trump administration have been abstract, or complicated, or murky. Whenever anyone warns about destruction of “norms,” the conversation quickly becomes speculative—the harms are theoretical, vague, and in the future.
This makes new Washington Post reporting about President Donald Trump’s border wall especially valuable. The Post writes about how Trump has repeatedly pressured the Army Corps of Engineers and the Department of Homeland Security to award a contract for building a wall at the southern U.S. border to a North Dakota company headed by a leading Republican donor.
The story demonstrates the shortcomings of Trump’s attempt to bring private-sector techniques into government. It shows his tendency toward cronyism, his failures as a negotiator, and the ease with which a fairly primitive attention campaign can sway him. At heart, though, what it really exemplifies is Trump’s insistence on placing performative gestures over actual efficacy. And it is a concrete example—almost literally—of how the president’s violations of norms weaken the country and waste taxpayer money.
The Post reports:
In phone calls, White House meetings and conversations aboard Air Force One during the past several months, Trump has aggressively pushed Dickinson, N.D.-based Fisher Industries to Department of Homeland Security leaders and Lt. Gen. Todd Semonite, the commanding general of the Army Corps, according to the administration officials, who spoke on the condition of anonymity to discuss sensitive internal discussions.
It may be a not-very-subtle sign of the frustration in the Army that the news leaked to the Post the same day that Semonite was called to the White House and Trump once again pressed him.*
Consider how easy it was for Mr. Trump to get a 25 percent tariff on steel imports. His administration simply concocted a fanciful national-security narrative about why the steel industry needed protection from foreign steel imports — this despite the industry’s enjoying a 70 percent share of the United States steel market and despite the Department of Defense finding no national-security harm from global steel imports.
.. For example, for the projected impact of the steel tariffs, numbers produced by the Commerce Department show that they may increase employment in the metals industry by 14,000 jobs. But the report also says that a significantly larger number of jobs will be destroyed, as a result of these tariffs, in industries downstream from metal production.
.. Under the current system, if Commerce Secretary Wilbur Ross decides to protect his friends and business interests in the steel industry, he can ignore the damage that his own data show the tariffs will inflict on some of the 6.5 million workers in America’s steel-consuming industries. His sole lawful obligation is to demonstrate that the economic fortunes of the 140,000 steel employees will be promoted by the tariffs.
.. when I.T.C. commissioners make their determinations in such cases, they’re actually forbidden by statute from considering the impact of these so-called trade remedies on downstream industries — those consumers of goods and services hit by the tariffs.
.. The good news is that there’s an easy fix: Change the statutes so that commissioners are required to consider the effects of trade restrictions on downstream industries and consumers.
.. Today, steel executives have an iron grip on the White House thanks to the deep ties of the president’s advisers to the industry.
- Mr. Ross made his fortune buying and selling steel companies and was sitting on a steel company’s board until his confirmation as commerce secretary.
- Robert Lighthizer, a private lawyer who represented the steel industry for years, is now the United States trade representative.
- The upper levels of both the Office of the United States Trade Representative and the Commerce Department have predictably been populated by other individuals with close ties to Big Steel. And the
- trade adviser Peter Navarro’s 2012 documentary, “Death by China,” was funded by one of the top beneficiaries of these tariffs — the steel producer Nucor.
This cronyism explains how the steel industry is directly involved in deciding which companies do or don’t receive exemptions from the steel tariffs and why so few exemptions have been granted.
Before long though, Caspian stopped allowing withdrawals. After three months, it stopped paying interest. Finally, in May, it shut its doors for good — becoming one of the largest in a long series of failures of Iranian financial institutions in recent years.
.. The outpouring of anger was directed not only at President Hassan Rouhani, who won re-election promising to revitalize the economy, but also the country’s supreme leader, Ayatollah Ali Khamenei.
.. The cascade of defaults, economists say, was not just the result of risky banking practices, but also a case study in official corruption — a major reason Iranians found their losses so infuriating. Adding to their outrage, Iranian officials made a series of statements blaming the victims for not being more careful with their money.
.. Many of the institutions, including those that merged in 2016 to form Caspian, were allowed to gamble with deposits or run Ponzi schemes with impunity for years, in part because they were owned by well-connected elites:
- religious foundations, the
- Islamic Revolutionary Guards Corps or
- other semiofficial investment funds
in the Iranian state.
.. as many as hundreds of thousands of people lost money because of the collapsing financial institutions. Iranians have a term for the growing class of victims: “property losers,” or “mal-baakhtegan” in Persian.
.. regulators have quietly steered many of the companies into mergers with larger banks to try to absorb their losses, but that has created a worsening problem of bad loans and overvalued assets throughout the banking system.
.. Economists say that as many as 40 percent of the loans carried on the books of Iranian banks may be delinquent.
.. Even Iran’s supreme leader, Mr. Khamenei, has acknowledged responsibility for the growing number of victims of “problematic financial institutions.”
“These appeals must be dealt with and heard out,” he said this month. “I myself am responsible; all of us must follow this approach.”
.. The corruption underlying the bank failures has long been an open secret
.. The loans totaled $1.9 billion, and almost all appeared to be held by well-known insiders.
.. Among them was Hossein Hedayati, a business tycoon and former member of the Revolutionary Guards, whose swift rise was so conspicuous that websites speculated about the sources of his sudden wealth. The document released by the lawmaker showed that Mr. Hedayati owed $285 million, and in a television program discussing the loan, another lawmaker, Mohammad Hassannejad, accused Mr. Hedayati of using a series of front companies to swing the loans and hide his role.
Mr. Hedayati dialed in to the program, sputtering with rage; he denied borrowing from Sarmayeh and threated to “sue everyone,” but has yet to follow through on the threat.
.. Clerics controlled religious foundations, called bonyads, that acquired commercial businesses. The largest of these, under the supreme leader, now makes up “15 to 20 percent” of the Iranian economy
.. All the semiofficial holding companies have major advantages over private businesses in favorable access to capital, tax exemptions and political connections.
.. But under a conservative president, Mahmoud Ahmadinejad, who came to power in 2005, semiofficial bodies controlled by clerics, the Revolutionary Guards or their allies dominated the newly private financial sector.
.. the Revolutionary Guards controlled at least two, while the army, the police, the municipality of Tehran and a giant religious foundation close to the Guards controlled the others.
.. the largest were usually run by individuals close to the same ruling elite
.. They say that made it almost impossible for even the best-intentioned regulators to police the banks.
.. The outsize returns promised by the banks and financial institutions lured capital that might better have gone to more productive uses
.. leaks about the high salaries of executives at state-run companies
.. The government has since tried to block the use of Telegram in Iran
Historians have long looked to a few key criteria in evaluating the beginning of a president’s administration.
First and foremost, any new president should execute public duties with a commanding civility and poise befitting the nation’s chief executive, but without appearing aloof or haughty. As George Washington observed at the outset of his presidency in 1789, the president cannot in any way “demean himself in his public character” and must act “in such a manner as to maintain the dignity of office.”
.. New presidents also try to avoid partisan and factional rancor, and endeavor to unite the country in a great common purpose.
They avoid even the slightest imputation of corruption, of course political but above all financial.
.. Over the decades, historians’ ratings of presidents have consistently consigned a dozen or so presidents to the bottom of the heap, including James Buchanan, Andrew Johnson, Franklin Pierce and, in recent evaluations, George W. Bush.
.. Yet the first years of these failed presidencies were not always so bad, and in nearly every case not as bad as Mr. Trump’s.
.. Warren G. Harding — darkly handsome, impeccably dressed and widely adored — acquired a reputation for cronyism, corruption and womanizing that continues to stain the reputation of his administration, which ended when he died of a heart attack in 1923. But while the corruption was very real, the worst of it, above all the Teapot Dome scandal, did not come to light until after his death.
.. Harding’s first year actually brought some auspicious legislative accomplishments, including passage of the Federal Highway Act of 1921, which invested millions in the nation’s infant highway system.
In October, Harding addressed a huge segregated crowd in Birmingham, Ala., and courageously urged equal political rights for blacks, without which, he said, “our democracy is a lie.”
.. In public Harding was a paragon of dignity, and his death was universally mourned.
.. Richard M. Nixon’s first year in office produced mixed results. He continued the Vietnam War but floated reforms such as a guaranteed annual income for the poor. He hinted at retreating from civil rights laws and court rulings, but enforced them.
The year also yielded innovations like the National Environmental Policy Act, which Nixon signed into law in January 1970. The mixture of arrogance and paranoia that would lead to the Watergate scandal did not take hold until later.
.. George W. Bush has made some worst-presidents lists because of the disastrous Iraq war and the collapse of the economy under his watch. But his first year was notable for his post-Sept. 11 leadership, when he rallied the country’s spirit while cautioning Americans not to turn their grief and outrage into reprisals against Muslims. He ended his first year with an approval rating in the Gallup poll of 83 percent.
.. Only two of the failed presidents had horrendous first years, which, like Mr. Trump’s, were a result largely of their own actions. James Buchanan, a wealthy bachelor, at all times courteous and dignified, connived behind the scenes even before he was inaugurated to help coax the Supreme Court into the calamitous Dred Scott decision of 1857, handed down a few days after his swearing-in and widely considered among the court’s worst.
.. Calculated to suppress antislavery politics once and for all, the decision instead alarmed Northerners by allowing the expansion of slavery — and it helped set the nation on the political course that ended in civil war.
.. The financial panic of 1857 and subsequent depression, the splintering of the Union and the later exposure of rampant corruption inside the executive branch added to the sense of Buchanan’s fecklessness.
.. Andrew Johnson, a vituperative racist, was temperamentally and politically unsuited to succeed the slain Abraham Lincoln. His troubles began when he showed up for his swearing-in as vice president drunk and belligerent.
.. After becoming president through assassination, Johnson at first signaled he would take a hard line against the defeated rebels, but then switched to attacking civil rights for the former slaves, siding with the ex-Confederates and engaging in abusive tirades against the Radical Republicans in Congress. He closed his first year by vetoing the Civil Rights Bill, which would have given the former slaves citizenship. Both houses of Congress swiftly overrode the veto, setting in motion the events that would end with Johnson’s impeachment in 1868.
.. Mr. Trump’s first year has been an unremitting parade of disgraces that have demeaned him as well as the dignity of his office, and he has shown that this is exactly how he believes he should govern.
.. he is the first president to fail to defend the nation from an attack on our democracy by a hostile foreign power — and to resist the investigation of that attack. He is the first to enrich his private interests, and those of his family, directly and openly.
.. He is the first president to denounce the press not simply as unfair but as “the enemy of the American people.”
He is the first to threaten his defeated political opponent with imprisonment.
He is the first to have denigrated friendly countries and allies as well as a whole continent with racist vulgarities.
.. If history is any guide — especially in light of the examples closest to his, of Buchanan and Andrew Johnson — Mr. Trump’s first year portends a very unhappy ending.
Masayoshi Son, wants the Department of Justice’s antitrust division and the Federal Communications Commission to allow a merger between Sprint and T-Mobile. In 2014 regulators appointed by President Obama made clear to Mr. Son that they would not approve such a transaction because it would cut the number of national wireless companies to three, from four, greatly reducing competition in a concentrated industry. Mr. Son sees a new opening for his deal in Mr. Trump, who has surrounded himself with people who have sided with large telecommunications companies in regulatory debates and have argued against tough antitrust enforcement.
.. This is crony capitalism, with potentially devastating consequences. If Mr. Trump appoints people to the antitrust division and the F.C.C. who are willing to wave through a Sprint/T-Mobile merger, he will do lasting damage to the economy that far outweighs any benefit from 5,000 jobs, jobs that might have been created even without the merger. Individuals and businesses will find wireless service costs a lot more when they have only Verizon, AT&T and T-Mobile/Sprint to choose from.
In addition, a combined Sprint and T-Mobile would inevitably cut thousands of jobs as executives merge the companies’ networks, stores, billing systems, customer service departments and so on.
.. It has become abundantly clear that Mr. Trump is easily distracted by shiny objects, especially if they reflect back on him. He’s more interested in boasting about how he personally saved a thousand jobs at Carrier, say, than in policy details that could make a difference in the lives of tens of millions of workers. Never mind that Carrier is only keeping about 800 jobs and that its chief executive said that the company would get rid of some of those anyway through automation.
We are, after all, about to hand over power to a man who has spent his whole adult life trying to build a cult of personality around himself;
.. Meanwhile, one look at his Twitter account is enough to show that victory has done nothing to slake his thirst for ego gratification. So we can expect lots of self-aggrandizement once he’s in office. I don’t think it will go as far as gold-plated statues, but really, who knows?
.. Some prominent Republicans are already suggesting that, rather than enforcing the ethics laws, Congress should simply change them to accommodate the great man.
.. Some Trump apologists have even taken to declaring that we needn’t worry about corruption from the incoming clique, because rich men don’t need more money. Seriously.
.. Not incidentally, James Comey, the F.B.I. director whose intervention almost surely swung the election, had previously worked for the Whitewater committee, which spent seven years obsessively investigating a failed land deal.
.. Indeed, America botched the occupation of Iraq in part thanks to profiteering by politically connected businesses.